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Are there rules for taxing digital services |
Rules have been brought in the statute, detailed guidelines are awaited. |
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Applicable date |
01/04/2022 |
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Nature of tax |
Corporate Income tax. |
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Tax rate |
40% on net basis. |
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Affected business models/in-scope activities |
Indian statute has provided a detailed definition of Significant Economic presence which also includes digital or virtual presence. The thresholds for such digital/virtual presence are also in the process of being prescribed (discussed in detail in subsequent column). No specific business model mentioned. |
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Revenue stream in scope |
The revenue stream includes: However, the above is the inclusive list and is not exhaustive. Any revenue generated from activities covered under the definition of significant economic presence would also be included. |
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In scope of tax treaties? |
The provisions are subject to the application of tax treaties which may restrict the ability of India to tax the relevant profits, depending on the facts. Tax treaties are not yet modified to include Significant economic presence. |
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Thresholds / de-minimis |
While the threshold have not been finalised, but it has been issued for public comments. Such threshold issued for public comment are as under: Only so much of income as is attributable to the transactions or activities referred to above shall be deemed to accrue or arise in India The threshold are yet to be notified. |
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Deduction or credit for recipient (DST only) |
This will be considered as regular corporate tax and foreign tax credit may be availed as per regular provisions of domestic law or treaty. |
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Exemptions |
The Rules are yet to be notified. |
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Revenue or profits based tax |
Profit attributable to cover activities vis a vis India. |
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Revenue in scope |
The revenue stream includes: However, the above is the inclusive list and is not exhaustive. Any revenue generated from activities covered under the definition of significant economic presence would also be included. |
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Who do these rules apply to |
To non-resident whose income accrues or arises in India attributable to the Significant Economic Presence. SEP has been defined as under: Threshold are yet to be notified. |
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Reporting / Compliance obligations |
Rules are yet to be notified. |
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OECD membership |
No. |
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As at |
27/05/2021 |
| BDO local resources | BDO in India |